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Economic Costs and Benefits of Road Pricing

Economic Costs and Benefits of Road Pricing. Douglass B Lee Jr Volpe Center. Questions. Does pricing generate benefits in excess of costs for operation of a given stock of capital? Does pricing provide the means for planning new capacity in all related modes?. The Standard Model.

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Economic Costs and Benefits of Road Pricing

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  1. Economic Costs and Benefits of Road Pricing Douglass B Lee Jr Volpe Center

  2. Questions • Does pricing generate benefits in excess of costs for operation of a given stock of capital? • Does pricing provide the means for planning new capacity in all related modes? US DOT/RITA Volpe National Transportation Systems Center

  3. The Standard Model • CP > no CP • delay and operating cost savings as valued by users (CS) > deterred vehicle trips as valued by users • assumes pricing is costless US DOT/RITA Volpe National Transportation Systems Center

  4. Modified Standard Model

  5. Extensions • Network • pricing expressways is effective • diversion to other expressways doesn’t avoid toll • could have two networks • arterial diversion is manageable • arterial capacity is limited • traffic management limits substitutability • Area Pricing or Cordon Pricing • reasonably close to standard model • depends on efficient use of revenues • reveals preference for substitute alternatives US DOT/RITA Volpe National Transportation Systems Center

  6. Multi-Class Service • Holding capacity constant • HOV < no HOV • 2-class service with 1 priced > HOV • 2-class service with 1 priced <?> 1-class no CP • 2-class with both priced > 2-class only 1 CP • 2-class both priced <?> 1-class CP US DOT/RITA Volpe National Transportation Systems Center

  7. Benefits of 2-Class Service • generalized price is lower for both classes, but money price for premium service is higher • for 2-C > single, sum of 2 areas > single US DOT/RITA Volpe National Transportation Systems Center

  8. Add Capacity • standard model • if incremental SR profit > annualized capital cost • cordon model • compare investment in substitute modes • multi-class model • revenues insufficient to signal • capital costs enlarged • occupancy is critical (BRT) US DOT/RITA Volpe National Transportation Systems Center

  9. Conclusions • congestion pricing generates net benefits if properly applied • HOT lanes an interim step • evidence of user WTP is required for investment • full facility pricing is probably most efficient • selected private concessions can be shortcut • devolution seems unavoidable US DOT/RITA Volpe National Transportation Systems Center

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